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RULE THE MARKET - Karvy views presented in this report are prepared by Karvy Stock Broking Limited and are subject to change without any notice. This report is based on information

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Text of RULE THE MARKET - Karvy views presented in this report are prepared by Karvy Stock Broking Limited...

  • ISSUE: 038

    25TH MAY, 2019

    RULE THE MARKET

  • From The Desk Of Research Head

    Disclaimer: Karvy Stock Broking Limited [KSBL] is registered as a research analyst with SEBI (Registration No INZ000172733). KSBL is also a SEBI registered Stock Broker, Depository Participant, Portfolio Manager and also distributes financial products. The subsidiaries and group companies including associates of KSBL provide services as Registrars and Share Transfer Agents, Commodity Broker, Currency and forex broker, merchant banker and underwriter, Investment Advisory services, insurance repository services, financial consultancy and advisory services, realty services, data management, data analytics, market research, solar power, film distribution and production, profiling and related services. Therefore associates of KSBL are likely to have business relations with most of the companies whose securities are traded on the exchange platform. The information and views presented in this report are prepared by Karvy Stock Broking Limited and are subject to change without any notice. 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    The market shifts its focus to Fundamentals after the Election Mandate

    Elections have dominated much of the market directions for quite a while now. With the Lok Sabha

    results and the elections out of the way, the euphoria created by it is slowly fading away as the focus

    shifts back on fundamentals. There has been an increase in the foreign and domestic investments

    because their faith and confidence has been restored in the market as a stable government once

    again takes charge.

    However, there are certain immediate worries for the market participants to look out for. The current

    liquidity crunch in the economy as an impact of the NBFC crisis last year, the outflows of the FIIs,

    slowdown in the volume growth of the consumption sector, softness in the auto sales and the FMCG

    sectors & their recent results, the lagging credit growth and the GDP growth slowing down has

    everyone worried. A slowdown in government spending in the last three quarters is also one of the

    reasons for the economic slowdown in general which is affecting the GDP figures of the country.

    We believe a correction for the inventory build-up is under process to try and solve the extent of the

    unexpected slowdown in the consumer demand. RBI has made efforts to ease the liquidity position

    in the country with tools such as the OMOs and two USD-INR swaps; more action is needed to make

    it better. However, we believe the economy should recover in Q2FY2019-20 with the increase in the

    capex which will drive the corporate earnings growth.

    The Indian equities have underperformed in the first two months due to lack of enthusiasm amongst

    institutional investors and outflows of FIIs. However, it has outperformed by almost 8% since then and

    the recent trend indicates an upward movement.

    With the trade war and the crude oil prices on the rise, the global economy remains a fragile

    environment. The flattening of the US yield curve followed by an inversion acts as a warning for tough

    days to come ahead. The weak Chinese economy and their structural problems are one of the major

    reasons for uncertainty at the global front. All the same, China has launched some major monetary

    and fiscal policies as an effort to stabilize the country’s growth. There is an impact of these measures,

    albeit they are small.

    India has done a good job in making significant progress in achieving macro stability since the last

    crisis of the taper tantrum. The CPI has reduced by almost 9% since 2013 and so has the fiscal deficit.

    The reforms carried out by the government such as the implementation of the Goods and Service

    Tax (GST), the Insolvency and Bankruptcy Code (IBC), establishment of the Real Estate Regulatory

    Authority (RERA) in states, formation of the Monetary Policy Committee (MPC) and the inflation

    targeting regime deserve a notable mention.

    Lastly, the NPA and stressed assets problem is being tackled through the IBC and the banking sector

    is in a position to support growth once again with the recapitalization of state-owned banks. As a

    result of the above reforms, the growth of the corporate sector earnings has been sub-par. However,

    these results will help in the long term growth to improve the Indian economy. Despite the current

    slowdown, the future prospect

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